Avis Budget Group, Inc. Q1 2010 Earnings Call Transcript

Avis Budget Group, Inc. Q1 2010 Earnings Call Transcript
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Avis Budget Group, Inc. (CAR)

Q1 2010 Earnings Call

May 4, 2010 9:00 am ET


Neal Goldner - Vice President Investor Relations

Ron Nelson - Chairman and Chief Executive Officer

Bob Salerno - President and Chief Operating Officer

David Wyshner - Executive Vice President and Chief Financial Officer


Chris Agnew – MKM Partners

John Healy – Northcoast Research

Jordan Hymowitz – Philadelphia Financial

Steve O’Hara – Sidoti & Company

Emily Shanks – Barclays Capital

Michael Millman – Millman Research Associates



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(Operator Instructions) Welcome to the Avis Budget Group First Quarter Earnings Conference Call. At this time for opening remarks and introductions, I would like to turn the conference over to Mr. Neal Goldner, Vice President of Investor Relations.

Neal Goldner

On the call with me are Ron Nelson our Chairman and Chief Executive Officer, Bob Salerno our President and Chief Operating Officer, and David Wyshner our Executive Vice President and Chief Financial Officer.

Before we discuss our results of the first quarter, I would like to remind everyone that the company will be making statements about future results and expectations which constitute forward looking statements within the meaning of the Private Securities Litigation Reform Act. Such statements are based on current expectations in the current economic environment and are inherently subject to economic, competitive, and other uncertainties and contingencies beyond the control of management. You should be cautioned that these statements are not guarantees of future performance.

Actual results may differ materially from those expressed or implied in the forward looking statements. Important assumptions and other important factors that could cause actual results to differ materially from those in the forward looking statements are specified in our Form 10-K, and in our earnings release which was issued last night. If you did not receive a copy of the press release it is available on our website at


. Also, certain non-GAAP financial measures will be discussed in this call and these measures are reconciled to the GAAP numbers in our press release.

Now I'd like to turn the call over to Avis Budget Group's Chairman and Chief Executive Officer Ron Nelson.



Before we discuss our first quarter results and our outlook I want to comment briefly on the letter we sent to Dollar Thrifty regarding its definitive agreement to be acquired by Hertz for $41 a share which only $34 is being funded by Hertz itself.

As stated in our press release issued yesterday morning, we have on several occasions in the past expressed interest in acquiring Dollar Thrifty. However, at no stage over the last several months did Dollar Thrifty or its financial advisors engage us in substantive discussions about a transaction or offer to provide us with information so that we might submit a bid.

Given our belief that an Avis Budget Dollar Thrift combination would be highly complementary and synergistic we have requested access to legal, financial, and business due diligence information relating to Dollar Thrifty including access to management so that we can formulate and submit a substantially higher offer. We are confident in our ability to structure and finance a transaction that would be mutually beneficially to our shareholders and Dollar Thrifty shareholders, particularly if the excessive provisions in the merger agreement are eliminated.

From an anti-trust perspective, Avis Budget is comparable to Hertz and we don’t see any barriers that would prevent us from completing a transaction on a comparable time table to Hertz. We’ve studied a potential transaction carefully and we would not have gone public with this announcement unless we thought we could get it done.

Accordingly, we look forward to the opportunity to engage in productive discussions with Dollar Thrifty’s Board of Directors to allow its shareholders the opportunity they deserve to realize the full value of their investments in Dollar Thrifty.

With that being said the purpose of today’s call to discuss our financial results. We do not intend to comment further on the Dollar Thrifty matter at this time. As a result, I will ask that you refrain from questions on that topic when we move to Q&A.

We are pleased to have reported a solid first quarter that reflected EBITDA growth in all three of our operating segments, year over year pricing increases, incremental benefits from our cost saving initiatives, and an increase in total EBITDA of more than $40 million versus first quarter 2009.

This morning I’d like to discuss some of the recent trends in our business and our operating strategies, and David will discuss our first quarter results, our capitalization and liquidity, and our outlook.

Let me start with the trends we’re seeing. We said in February that we expected volume in the first quarter to be down year over year but the price would be up and that’s exactly what we have reported. We purposely kept our fleet tight in the quarter and clearly left volume on the table. We set our price levels in certain channels both commercial and leisure at levels where we expected to leave volume behind but at market clearing prices knew that winning would result in unprofitable or minimally profitable transactions.

The net result was that we reported higher pricing and improved margins in each of our segments not only versus a year ago when the industry was in the midst of a crisis but compared to the first quarter of 2008 as well. In the quarter, domestic rental days declined 13% with leisure days down 18% and commercial days down 9%. More importantly, as the quarter progressed, our domestic volume comparisons improved month by month in both commercial and leisure rentals.

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